Chapter X - Audit and Auditors
Section 147
Section 147: punishment for contravention
Section 147 punishes contraventions of the audit provisions in sections 139 to 146: fines for the company and its officers, fines linked to remuneration for auditors, and imprisonment where an auditor acts knowingly or wilfully to deceive.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.
(2) If an auditor of a company contravenes any of the provisions of section 139, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees or four times the remuneration of the auditor, whichever is less: Provided that if an auditor has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of the auditor, whichever is less.
(3) Where an auditor has been convicted under sub-section (2), he shall be liable to— (i) refund the remuneration received by him to the company; and (ii) pay for damages to the company, statutory bodies or authorities or to members or creditors of the company for loss arising out of incorrect or misleading statements of particulars made in his audit report.
(4) The Central Government shall, by notification, specify any statutory body or authority or an officer for ensuring prompt payment of damages to the company or the persons under clause (ii) of sub-section (3) and such body, authority or officer shall after payment of damages to such company or persons file a report with the Central Government in respect of making such damages in such manner as may be specified in the said notification.
(5) Where, in case of audit of a company being conducted by an audit firm, it is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally: Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud shall only be liable.
Introduction
Section 147 is the penalty provision for Chapter X. It separately addresses the company and its officers, the auditor, the auditor’s civil consequences after conviction, and how liability is shared within an audit firm.
The Companies (Amendment) Act, 2017 capped auditor fines by reference to remuneration, restricted damages to the company, statutory bodies or authorities, members or creditors, and limited non-fine criminal liability of an audit firm to the partners concerned (from 9 February 2018). The Companies (Amendment) Act, 2020 removed imprisonment for officers under sub-section (1) and took section 143 out of sub-section (2) (from 21 December 2020).
Key takeaways
Company and officers
Company: fine of ₹25,000 to ₹5 lakh. Every officer in default: fine of ₹10,000 to ₹1 lakh.
Auditor
Contravening section 139, 144 or 145: fine of ₹25,000 up to ₹5 lakh or four times the remuneration, whichever is less; if knowing or wilful with intent to deceive, imprisonment up to one year and fine of ₹50,000 up to ₹25 lakh or eight times the remuneration, whichever is less.
After conviction
A convicted auditor must refund remuneration and pay damages for loss caused by incorrect or misleading statements in the audit report.
Company and officers in default
If any of sections 139 to 146 is contravened, the company is punishable with fine of not less than twenty-five thousand rupees, extendable to five lakh rupees. Every officer of the company in default is punishable with fine of not less than ten thousand rupees, extendable to one lakh rupees. Imprisonment for officers was omitted with effect from 21 December 2020.
- India Code — consolidated Companies Act, 2013, section 147
- Gazette of India — Companies Act, 2013 as enacted (No. 18 of 2013), section 147
- eGazette — MCA notification S.O. 902(E), 26 March 2014 - listed provisions in force from 1 April 2014
- eGazette — Companies (Amendment) Act, 2017 (No. 1 of 2018)
- eGazette — MCA notification S.O. 630(E), 9 February 2018 - listed sections of Act 1 of 2018 in force
- eGazette — Companies (Amendment) Act, 2020 (No. 29 of 2020)
- eGazette — MCA notification S.O. 4646(E) - listed sections of Act 29 of 2020 in force from 21 December 2020
Auditor contraventions
An auditor who contravenes section 139, section 144 or section 145 is punishable with fine of not less than twenty-five thousand rupees, extendable to five lakh rupees or four times the auditor’s remuneration, whichever is less. Since 21 December 2020, section 143 is no longer listed in sub-section (2); non-compliance with the fraud-reporting duty in section 143(12) carries the separate penalty in section 143(15).
If the auditor contravened those provisions knowingly or wilfully with the intention to deceive the company, its shareholders, creditors or tax authorities, the punishment is imprisonment for a term up to one year and fine of not less than fifty thousand rupees, extendable to twenty-five lakh rupees or eight times the remuneration, whichever is less.
Refund and damages after conviction
An auditor convicted under sub-section (2) is liable to refund the remuneration received to the company, and to pay damages to the company, statutory bodies or authorities, or members or creditors of the company for loss arising out of incorrect or misleading statements of particulars in the audit report.
The Central Government is to specify by notification a statutory body, authority or officer to ensure prompt payment of such damages. That body, authority or officer, after payment, files a report with the Central Government in the manner specified in the notification.
Audit firms and partners
Where an audit is conducted by an audit firm and it is proved that a partner or partners acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, the civil or criminal liability under the Act or any other law is of the partners concerned and of the firm jointly and severally.
For criminal liability of an audit firm, in respect of liability other than fine, only the partners who acted fraudulently or abetted or colluded in the fraud are liable.
Practical preparation
Audit committee and Board: track compliance with sections 139 to 146 (appointment, removal and resignation, eligibility, remuneration, auditor duties, prohibited services, signing and AGM attendance). Auditors: check prohibited services under section 144 and signing duties under section 145, and remember the separate section 143(15) penalty for fraud-reporting failures. Firms: document partner roles on each engagement.
Practical checklist
Do
- Map each Chapter X duty to an owner so the officer in default can be identified.
- Record the auditor’s remuneration clearly; it determines the auditor’s fine caps.
- Keep engagement records showing which partners acted on an audit.
Avoid
- Do not assume officers face imprisonment under section 147(1) after 21 December 2020.
- Do not assume a contravention of section 143 is punished under section 147(2) after 21 December 2020; check section 143(15) and the other applicable provisions.
Illustrative example
Hypothetical: auditor provides a prohibited service
An auditor renders to the company a service that section 144 prohibits, without intent to deceive.
Provision
The contravention of section 144 falls within section 147(2).
Range
The fine is at least ₹25,000, and at most ₹5 lakh or four times the remuneration, whichever is less.
Eligibility
Separately, rendering a section 144 service also disqualifies the auditor under section 141(3)(i), so the office is vacated and a casual vacancy arises.
Outcome
- Both the penalty and the loss of eligibility follow; imprisonment applies only if the contravention was knowing or wilful with intent to deceive.
Glossary
- Officer who is in default
- The officer liable under the Act for a default, as defined in section 2(60).
- Remuneration of the auditor
- The auditor’s remuneration, used as the reference for the alternative caps in section 147(2).
- Jointly and severally
- Liability that may be enforced against the firm and the partners concerned together or individually.
Frequently asked questions
Can company officers be imprisoned under section 147(1)?
No. Since 21 December 2020, section 147(1) provides only a fine of ten thousand to one lakh rupees for every officer in default.
How is an auditor’s fine capped?
For an ordinary contravention, at five lakh rupees or four times the remuneration, whichever is less; for a knowing or wilful contravention with intent to deceive, at twenty-five lakh rupees or eight times the remuneration, whichever is less, with imprisonment up to one year.
Who can claim damages from a convicted auditor?
The company, statutory bodies or authorities, and members or creditors of the company, for loss arising from incorrect or misleading statements in the audit report.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026